the Council of Ministers’ Regulations on Mining Operations n°182-1994 amended by Regulation n°27/1998 and Regulation n°124-2006 (“Regulation n°182/1994”).

1.2 Which Government body/ies administer the mining industry?

The principal body that administers the mining industry is the Ministry of Mines and Energy.

1.3 Describe any other sources of law affecting the mining industry.

Other sources of law affecting the mining industry include the Environmental Impact Assessment Proclamation n°299/2002 (which provides that an environmental impact assessment has to be carried out for activities that may have adverse consequences on the environment – i.e. including mining), the Labour Proclamation n°377/2003 (which, inter alia, obliges employers to take health and safety measures in work places and employees to comply with health and safety rules), and the Commercial Registration and Business Licensing Proclamation n°686/2010 (which is applicable to any person who intends to engage in the mining sector).

Mechanics of Acquisition of Rights

In order to conduct reconnaissance, a reconnaissance licence is required. The Licensing Authority may grant a reconnaissance licence, which is not renewable, for a period that shall not exceed eighteen (18) months (article 16 of the Proclamation n°678-2010).

Procedure:

An application must be submitted to the Licensing Authority. Where the latter is satisfied with the application, it registers the application and gives a receipt to the applicant. The Licensing Authority, after registering the application, publishes it to third parties through widely accessible mass media:

If a person objects to the granting of the licence within seven (7) days as from the date of publicity, the Licensing Authority initiates negotiations between the parties concerned in order to resolve the objection. If the parties fail to resolve the objection, the Licensing Authority hears the presentations of both parties and decides on the upholding or rejection of the objection within fifteen (15) working days.

If no objection to the application has been filed at its office, the Licensing Authority, following verification of all information submitted in connection with the application, and upon payment of the fees and rentals, grants the licence to the applicant.

2.2 What rights are required to conduct exploration?

The Licensing Authority may grant an exploration licence to an applicant (i) who has demonstrated that it has the financial resources and technical ability to conduct the exploration operations in question in accordance with the work programme, (ii) whose estimated exploration expenditure is in accordance with the prescribed minimum exploration expenditure and the exploration work programme, (iii) whose environmental impact plan has been approved, and (iv) who is not in breach of any obligation in the reconnaissance licence (article 17 of the Proclamation n°678-2010).

An exploration licence is granted for a period that cannot exceed three (3) years, renewable twice for a period not exceeding one year each. It is to be noted that the Licensing Authority may allow further extensions of renewal if the licensee proves the necessity to undertake exploration activity beyond the initial work programme. However, such period shall not exceed five (5) years.

Procedure:

The applicable procedure is the same as that described in question 2.1 above.

2.3 What rights are required to conduct mining?

In order to conduct mining, the holder of an exploration licence must apply for a mining licence. There are two types of mining licence: the large-scale mining licence; and the small-scale mining licence.

Large-scale mining licence:

The large-scale mining licence regime applies to any mining operation for which the annual run-of-mine ore exceeds, inter alia, the following limits:

For gold, platinum, silver and other precious and semi-precious minerals:

100,000m3 for placer operation; and

75,000 tonnes for primary deposit mining.

For metallic minerals such as iron, lead, copper and nickel:

150,000 tonnes for open pit mining; and

75,000 tonnes for underground mining operation.

A large-scale mining licence shall not exceed twenty (20) years, and is renewable provided that the new period does not exceed ten (10) years (article 27 of the Proclamation n°678-2010).

Procedure:

The applicable procedure is the same as that described in question 2.1 above.

Small-scale mining licence:

The small-scale mining licence regime applies to any mining operation of which the annual run-of-mine ore does not exceed the above-mentioned limits.

The small-scale mining licence shall not exceed ten (10) years, and is renewable provided that the new period does not exceed five (5) years (article 29 of the Proclamation n°678-2010).

Procedure:

The applicable proceeding is the same as that described in section 2.1 above.

Rights and obligations:

The holder of a small-scale or large-scale mining licence shall have, inter alia, the following rights and obligations:

the right to market and sell minerals produced;

to commence mining operations within two (2) years as from the date of the licence; and

to comply with the terms and conditions of the licence.

Artisanal mining licence:

The artisanal mining regime applies to any mining operation carried out by individuals or small and micro enterprises that is mostly of a manual nature and does not involve the engagement of employed workers.

The licence is granted for a period specified in the licence that shall not exceed two (2) years and may not be renewed.

Procedure:

The applicable proceeding is that described in question 2.1 above.

Rights and obligations:

The holder of an artisanal mining licence shall have, inter alia, the following rights and obligations:

to undertake mining operations in accordance with environment, health and safety standards;

to comply with the terms and obligations of the licensee; and

to have a preferential treatment regarding the licensee where the latter shows that it has the necessary technical and financial resources to engage in advanced exploration and mining.

Retention licence:

The Licensing Authority can grant an exclusive retention licence to the applicant if:

the latter has demonstrated that the discovery of a mineral deposit within the exploration area is potentially of commercial significance; and

the mineral deposit cannot be developed immediately because of adverse market conditions, other economic factors, or unavailable processing technologies, which are of a temporary character.

The retention licence is granted for the period specified in the licence but cannot exceed three (3) years. The licence can be renewed once for a period not exceeding three (3) years where the licensee demonstrates that the above-mentioned conditions still prevail.

Procedure:

The applicable procedure is the same as that described in question 2.1 above.

Rights and obligations:

The holder of a retention licence shall have, inter alia, the following rights and obligations:

the right to be granted a mining licence in respect of the retention area a mineral in question prior to expiry of the licence;

to submit an annual progress report to the Licensing Authority indicating:

the prevailing market conditions and technical factors, the effect thereof and the need to hold such retention licence over the mineral and land in question; and

efforts undertaken by it to ensure that mining operations commence before the expiry of the duration of the licence.

2.4 Are different procedures applicable to different minerals and on different types of land?

Please see question 2.3 above.

2.5 Are different procedures applicable to natural oil and gas?

Procedures regarding natural oil and gas are not covered by the Proclamation n°678-2010 and Regulation n°182/1994 but are overseen by the same governmental body, namely, the Ministry of Mines.

3.1 What types of entity can own reconnaissance, exploration and mining rights?

Reconnaissance operations may only be conducted by Ethiopians who have a licence, whereas foreigners are not permitted to conduct reconnaissance operations at all. Further, only Ethiopian nationals can apply for, and obtain, artisanal mining licences.

3.2 Can the entity owning the rights be a foreign entity or owned (directly or indirectly) by a foreign entity and are there special rules for foreign applicants?

Article 40 of Proclamation n°678-2010 provides that in order to transfer a large-scale mining licence, the prior consent of the Licensing Authority is required. The application to transfer or assign a large-scale mining licence must include specific information and documents listed under article 40 as, for example, the nature, nationality, legal form, and capital of the proposed transferee, etc. Other than that, there is no change of restriction control applicable under the mining laws.

3.3 Are there requirements for ownership by indigenous persons or entities?

As indicated above, Ethiopian nationality is required for obtaining artisanal mining licences. In addition (and as stated in the answer to question 3.4 below) the government is entitled to a 5% equity participation.

3.4 Does the State have free carry rights or options to acquire shareholdings?

It is to be noted that the government may acquire a free participation interest of 5% of any large-scale or small-scale mining investment. An additional equity participation of the government may also be provided by agreement. The latter will specify the percentage, the timing, the financing, the resulting rights and obligation, and any other details of the government participation.

3.5 Are there restrictions on the nature of a legal entity holding rights?

It is to be noted that there is no restriction on the type of legal entity that may hold rights in the mining sector. In this way, mining activities may be carried out by a legal entity in the form of a sole ownership, partnership or company (whether share or private limited company).

Processing, Refining, Beneficiation and Export

4.1 Are there special regulatory provisions relating to processing, refining and further beneficiation of mined minerals?

The holder of a small-scale or large-scale mining licence shall have the right to market and sell minerals produced (article 30 of the Proclamation n°678-2010).

It is to be noted that the holder of a mining licence obtains a title to the minerals specified in the licence upon their extraction (article 42 of the Proclamation n°678-2010).

4.2 Are there restrictions on the export of minerals and levies payable in respect thereof?

The holder of an exploration licence must obtain the prior consent of the Ministry of Mines to export samples of minerals for testing, and it is to be noted that such minerals remain the property of the Government of Ethiopia (article 42 of the Proclamation n°678-2010).

The holder of a mining licence has the right to sell locally or to export the minerals in relation to which he obtained a title specified in the licence upon their extraction. In order to export, however, it is necessary to obtain a competency certificate from the Ministry of Mines as well as a business licence from the Ethiopian Ministry of Trade.

Transfer and Encumbrance

5.1 Are there restrictions on the transfer of rights to conduct reconnaissance, exploration and mining?

Any licence other than reconnaissance or retention licences may be transferred subject to the prior consent of the Licensing Authority. However, no licence may be transferred to a company in liquidation or insolvency (article 38 of the Proclamation n°678-2010).

5.2 Are the rights to conduct reconnaissance, exploration and mining capable of being mortgaged or otherwise secured to raise finance?

This is not covered under Proclamation n°678-2010 and Regulation n°182/1994. However, as mentioned under question 5.1 above, the transfer of any licence is possible, subject to the prior consent of the Licensing Authority. We are therefore of the view that these rights may be mortgaged, subject to the prior consent of the Licensing Authority, except for a reconnaissance licence which may not be mortgaged.

Dealing in Rights by Means of Transferring Subdivisions, Ceding Undivided Shares and Mining of Mixed Minerals

6.1 Are rights to conduct reconnaissance, exploration and mining capable of being subdivided?

These rights may be subdivided except for reconnaissance or retention licences, and provided that this is approved and registered by the competent government authority.

6.2 Are rights to conduct reconnaissance, exploration and mining capable of being held in undivided shares?

It is to be noted that reconnaissance, exploration and mining shares can be held by companies through a joint venture agreement, a private limited company or share company.

6.3 Is the holder of rights to explore for or mine a primary mineral entitled to explore or mine for secondary minerals?

The holder of a mining licence can amend his licence to include other minerals that are not specified in the licence, or to include other areas outside his licenced area where he believes that the licenced area does not include the entire deposit of minerals (article 33 of the Proclamation n°678-2010).

6.4 Is the holder of a right to conduct reconnaissance, exploration and mining entitled to exercise rights also over residue deposits on the land concerned?

It is to be noted that before being able to conduct reconnaissance, exploration or mining over residue deposits, a new licence will be required (and following the termination, revocation or expiry of the previous licence over the land in question).

6.5 Are there any special rules relating to offshore exploration and mining?

Ethiopia is a landlocked country and there is therefore no specific legislation governing offshore exploration and mining.

Rights to Use Surface of Land

7.1 Does the holder of a right to conduct reconnaissance, exploration or mining automatically own the right to use the surface of land?

The holder of a licence has the right to (i) bring into the licensed area any plant, machinery or equipment and build and construct any surface or underground infrastructure required for the purposes of the envisaged mining operations, (ii) use, subject to the relevant water laws, water from any water body, situated on, or flowing through, such land or sink a well or borehole required for mining operations, and (iii) subject to the applicable law regarding the cutting of timber and reforestation, cut and use, within the licenced area and the area of lease, timber which is necessary for mining operations (article 33 of the Proclamation n°678-2010).

7.2 What obligations does the holder of a reconnaissance right, exploration right or mining right have vis-à-vis the landowner or lawful occupier?

The holder of a mining licence must take proper precautions not to interfere with other legitimate occupants of the licenced area, the land covered by a lease and the adjacent land (article 34 of the Proclamation n°678-2010).

7.3 What rights of expropriation exist?

Article 59 of Proclamation n°678-2010, as amended, provides that the Licensing Authority may expropriate any immoveable property on any land. However, in return for this expropriation, the licence holder will be entitled to receive fair compensation.

Environmental

8.1 What environmental authorisations are required in order to conduct reconnaissance, exploration and mining operations?

In order to conduct reconnaissance, exploration and mining operations, the applicant must: (i) obtain, from the Environmental Protection Authority, a permit regarding the management of waste (article 3 of Proclamation n°300-2002); (ii) have an the environmental impact study report approved by the Environmental Protection Authority; and (iii) have authorisation from the concerned body of an urban administration engaging in collection, transportation, use or disposal of solid waste (article 4 of Proclamation n°513/2007).

8.2 What provisions need to be made for storage of tailings and other waste products and for the closure of mines?

The holder of a small-scale or large-scale mining licence must apply to the Licencing Authority for a mine closure certificate within one hundred and eighty (180) days prior to revocation of the licence, termination of the mining operations, relinquishment of the whole or any portion of the licence area or abandonment of the mine (article 61 of the Proclamation n°678-2010).

8.3 What are the closure obligations of the holder of a reconnaissance right, exploration right or mining right?

The owner of any solid waste disposal shall be liable for any damage caused to the environment, human health or property in the course of its operation and after its closure within two years as from the date on which the damage was known. An exemption from this liability is granted when it is either the victim himself, or a third party for whom the owner of the solid waste disposal site is not responsible who has caused the damage (article 16 of the Proclamation n°678-2010).

8.4 Are there any zoning or planning requirements applicable to the exercise of a reconnaissance, exploration or mining right?

Whilst, in principle, any land in Ethiopia is available for mining, and unless the national interest is not served, it is to be noted that exploration, retention and mining licences will not be issued for certain areas that are specifically reserved, such as religious sites and cemeteries, or national parks.

Native Title and Land Rights

9.1 Does the holding of native title or other statutory surface use rights have an impact upon reconnaissance, exploration or mining operations?

No it does not, except with regards to the issue of property located on the area that is required for the mining activities (where procedures for expropriation and the payment of consideration will apply).

Health and Safety

There is no specific legislation which governs health and safety in mining. That being said, however, it is to be noted that Labour Proclamation n°377/2003 obliges employers to take measures to ensure occupational health and safety in the workplace. See the answer to question 10.2 below.

10.2 Are there obligations imposed upon owners, employers, managers and employees in relation to health and safety?

As a general obligation, the holder of a mining licence must conduct mining operations in such manner as to ensure the health and safety of his agents, employees and other persons, and comply with the applicable laws pertaining to environmental protection (article 34 of the Proclamation n°678-2010).

Administrative Aspects

The Licensing Authority establishes and maintains a Registry of Licences and Leases (article 15 of the Proclamation n°678-2010).

11.2 Is there a system of appeals against administrative decisions in terms of the relevant mining legislation?

In accordance with Proclamation n°678/2010, administrative remedies are to be used up first before applying to a competent court for a review of the decision that has been made. In addition, Proclamation n°678/2010 provides that any disputes are first to be referred to negotiation. If that fails, the matter will then go to arbitration and, from there, an appeal against the decision of the arbitrators may be submitted before the competent court.

Constitutional Law

12.1 Is there a constitution which has an impact upon rights to conduct reconnaissance, exploration and mining?

The 1995 Constitution does not restrict the right to carry out mining provided that the exercise of such right does not bring into operation the expropriation and compensation provisions of the Constitution.

12.2 Are there any State investment treaties which are applicable?

It is to be noted that Ethiopia has signed Bilateral Investment Treaties (“BITs”) with 29 countries: Algeria; Austria; Belgium-Luxembourg Economic Union; China; Denmark; Egypt; Equatorial Guinea; Finland; France; Germany; India; Iran; Israel; Italy; Kuwait; Libya; Malaysia; the Netherlands; Nigeria; Russian Federation; South Africa; Spain; Sudan; Sweden; Switzerland; Tunisia; Turkey; the United Kingdom; and Yemen. Investors that come to Ethiopia from one of the aforementioned countries will have favourable treatment in accordance with the terms of their respective BITs.

Taxes and Royalties

13.1 Are there any special rules applicable to taxation of exploration and mining entities?

It is to be noted that the Federal Income Tax Proclamation n°979/2016, provides, inter alia, that a business income tax rate of 25% is applicable to licensees (article 37). Further, a licensee effecting payment to a non-resident subcontractor shall withhold and transfer to the tax authority ten (10%) of the payment.

13.2 Are there royalties payable to the State over and above any taxes?

Yes. The rate depends on the different kind of minerals. Thus, for precious minerals the rate is 8%, for semi-precious minerals 6%, for metallic minerals 5%, for industrial minerals 4%, for construction minerals 3%, for salt 4%, and for geothermal 2%.

Regional and Local Rules and Laws

14.1 Are there any local provincial or municipal laws that need to be taken account of by a mining company over and above National Legislation?

Yes. It is to be noted that regional state governments are empowered to administer the land and natural resources in accordance with the federal laws of the country. Artisanal and small-scale mining are usually governed by regional laws.

14.2 Are there any regional rules, protocols, policies or laws relating to several countries in the particular region that need to be taken account of by an exploration or mining company?

Cancellation, Abandonment and Relinquishment

15.1 Are there any provisions in mining laws entitling the holder of a right to abandon it either totally or partially?

The holder of a mining licence may relinquish all or part of the licence area by giving prior written notice (of at least 12 months) to the Licensing Authority and upon fulfilment of all obligations of the licence (article 33 of the Proclamation n°678-2010).

15.2 Are there obligations upon the holder of an exploration right or a mining right to relinquish a part thereof after a certain period of time?

Upon the renewal of an exploration licence, it is to be noted that the holder is obliged to relinquish a portion of not less than one quarter of the licenced area.

15.3 Are there any entitlements in the law for the State to cancel an exploration or mining right on the basis of failure to comply with conditions?

The Licensing Authority may partially or fully suspend mineral rights where it believes that the activity of the licensee is likely to become an imminent danger to the local community, the environment or its employees (provided that such suspension is the only remedy under the prevailing circumstances), and it may revoke the licence altogether in the following circumstances:

the licensee fails to comply with the financial obligations prescribed in the Proclamation n°678-2010, regulations or directives;

the licensee conducts mining operations in a grossly negligent or wilfully improper manner;

the licensee breaches any material term or condition of his licence;

the licensee is not conducting his mining operations in accordance with the work programme;

the licensee is in breach of the approved environmental impact assessment, and safety and health standards;

the licensee has submitted false or fraudulent information in connection with any matter required to be submitted under the proclamation, regulations or directives;

the licensee fails to maintain complete, accurate and current books and records or other documents or materials required or fails to file reports or other documents or fails to give notices required; or

the licensee fails to grant a duly authorised official of the Licensing Authority access into the licenced area, the area covered by a lease or to any other site or premises of the mining operations or to his books, records, other documents or materials, or fails to carry out a lawful order or instruction of such official (article 44 of Proclamation n°678-2010).